[Sheryl_Jones]

Originally Posted by tony soprano

If anyone believes there's any market that exists where its participants manipulate the prices downward so as to maximize their losses, please DM me. I'm selling a bridge (in like new condition) that you may be interested in.

There was a bid rigging conspiracy I saw in the news yesterday, somewhere in California, one of the Central Valley cities, and it said that buyers on the courthouse steps were rigging it so that they would let one person get the lowest bid and nobody would bid against them on purpose, then that person would resale the house at a higher cost and they would all split the profits amongst themselves. The news also said that this may be widespread and they are doing more investigating. So in a case like that, technically, it would be buyers participating in the market who are manipulating the prices downward, which has them all sharing in the profits later on when the places are sold. That was somewhere in the news yesterday, but I do not have a link. If the bridge you are selling is the Brooklyn Bridge, if the price is right I might be interested in seeing it.

[tony soprano]

Originally Posted by Sheryl_Jones

There was a bid rigging conspiracy I saw in the news yesterday, somewhere in California, one of the Central Valley cities, and it said that buyers on the courthouse steps were rigging it so that they would let one person get the lowest bid and nobody would bid against them on purpose, then that person would resale the house at a higher cost and they would all split the profits amongst themselves. The news also said that this may be widespread and they are doing more investigating. So in a case like that, technically, it would be buyers participating in the market who are manipulating the prices downward, which has them all sharing in the profits later on when the places are sold. That was somewhere in the news yesterday, but I do not have a link. If the bridge you are selling is the Brooklyn Bridge, if the price is right I might be interested in seeing it.

Sheryl, what you're probably referring to is the act of collusion - agreeing with other market participants not to bid against each other so as to keep the final sales price low. The auction participants are colluding to maximize their profits, not their losses.

That's the type of behavior you'd expect in a capitalistic market - profit maximization. Although collusion is profit maximization taken to the extreme and in the above example, likely illegal. That's completely opposite from the absurd notion that banks are actively manipulating the prices of the homes they carry on their books downwards, which would have the effect of maximizing their losses.

Now, about that bridge...

[olecapt]

Originally Posted by tony soprano

If anyone believes there's any market that exists where its participants manipulate the prices downward so as to maximize their losses, please DM me. I'm selling a bridge (in like new condition) that you may be interested in.

And anyone dumb enough to believe that there are two kinds of SFRs - those sold by the lenders as REOs and those sold by individuals as classics should absolutely call up Tony and buy his bridge.

[khuntrevor]

Captain, I'm not sure I follow you on that one, but it seems only the "LV School of Denial" teaches to realtors and underwater homeowners that REOs don't count as comps, and the assessor data means absolutely nothing.

[tony soprano]

Originally Posted by olecapt

And anyone dumb enough to believe that there are two kinds of SFRs - those sold by the lenders as REOs and those sold by individuals as classics should absolutely call up Tony and buy his bridge.

I bought my first REO 16 years ago. The purchase price then was about 10% - 12% less than comparable non-REO properties. The housing market today is an order of magnitude worse now. You may be the only realtor in Vegas that doesn't understand why REOs are priced lower.

[olecapt]

Originally Posted by khuntrevor

Captain, I'm not sure I follow you on that one, but it seems only the "LV School of Denial" teaches to realtors and underwater homeowners that REOs don't count as comps, and the assessor data means absolutely nothing.

Actually the use of REOs as comps is very much a subject of controversy. If you were active in the industry you would know that.

Classically single REOs were ignored as not being an arms length transaction between a competent buyer and a competent and willing seller.

In our mess they are considered if they are a significant portion of the sales in a neighborhood.

If however the neighborhood has 8 classics and two REOs the REOs are pretty much ignored.

The issue however remains the same. Are there two kinds of houses? Classics sell all across the board for 25% more than REOs. So they must be different kinds of houses right?

[olecapt]

Originally Posted by tony soprano

I bought my first REO 16 years ago. The purchase price then was about 10% - 12% less than comparable non-REO properties. The housing market today is an order of magnitude worse now. You may be the only realtor in Vegas that doesn't understand why REOs are priced lower.

Explain it to me.

I have two houses on the same block virtually identical in every parameter. Explain to me why one is worth 25% less than the other. I am all ears.

[tony soprano]

Originally Posted by olecapt

Explain it to me.

I have two houses on the same block virtually identical in every parameter. Explain to me why one is worth 25% less than the other. I am all ears.

The owner of one of the two houses is incurring carrying costs every month that they own it, with no corresponding benefit. That owner is accruing expenses in the form of taxes, HOA dues, insurance, maintenance, etc., without the benefit, or need, of using it as shelter. Secondly, that owner's livelihood is somewhat dependent on their ability to efficiently deploy capital. The house they own is generating a negative rate of return when the capital it ties up could be used, at the very least, to earn a risk-free rate of return of ~3.25%

The owner of the other house would like to sell their home so they can buy another one.

The owner of one of the houses is more motivated to sell their home than the other owner and is willing to discount their sales price accordingly. I'll let you figure out which of the two owners is a bank.

[olecapt]

Originally Posted by tony soprano

The owner of one of the two houses is incurring carrying costs every month that they own it, with no corresponding benefit. That owner is accruing expenses in the form of taxes, HOA dues, insurance, maintenance, etc., without the benefit, or need, of using it as shelter. Secondly, that owner's livelihood is somewhat dependent on their ability to efficiently deploy capital. The house they own is generating a negative rate of return when the capital it ties up could be used, at the very least, earning a risk-free rate of return of ~3.25

So only bank owned houses have carrying costs?

So only banks have opportunity cost?

The owner of the other house would like to sell their home so they can buy another one.

YOu know this how? And they have not moved? They are not encountering the costs that the bank owned home does?

The owner of one of the houses is more motivated to sell their home than the other owner and is willing to discount their sales price accordingly. I'll let you figure out which of the two owners is a bank.

Ohh... so your real answer is self-evident truth?

There is every reason to believe that many...if not most...private sellers are vastly more motivated to sell than a lender.. Their entire financial future collapses if they don't sell well. So they should be the low price leader..

Does not work that way though does it?

Sad try Tony...sad try.

[eventusstultorummagister]

Originally Posted by olecapt

Explain to me why one is worth 25% less than the other. I am all ears.

Top 3 reasons:

1. It won't appraise (@higher price)
2. Low prices fuel demand (banks have a plethora of homes to unload)
3. There are no jobs and foreclosure filings are rising (again)